Thursday, December 15, 2016

More on crossing the river by feeling the stones...

The two less discussed characteristic features of China's spectacular economic growth have been its brute force state capacity as well as the strategy of innovative policy experimentation at the margins. The Economist has a nice article on the emergence of Shanghai as competitor to Beijing as the cultural capital of China in the space of less than a decade. It captures these two features,

The prospect of hosting Expo 2010 helped motivate Shanghai’s local government to encourage property developers to launch an ambitious urban-regeneration programme that would reframe the city as a cultural hub. At the heart of this renewal was West Bund, a 9.4km tract of Shanghai riverside, whose old industrial buildings and former airport were to be repurposed under the manifesto “Culture First, Industry Oriented”. The same year that Expo 2010 opened, the central government announced that it would build 3,500 new museums across the country within five years. It exceeded that figure three years early, in 2012. The call to action stimulated property developers to tag museums on to many of their projects in return for tax benefits and to curry favour with local authorities. West Bund was one of the most important beneficiaries of this policy. In 2014 two landmark contemporary-art museums opened there...

The same year also saw the introduction of Le Freeport West Bund, a bonded warehouse built to help the tax-free import, export and storage of artworks. It allows collectors to sidestep the 17% value-added tax imposed on art and the customs duty on works brought into the country. A game-changer for freeing up the movement of artworks, it is a prime example of the city’s market-friendliness.

The efficiency of a publicly directed museum construction and mobilisation campaign to generate world class outcomes is simply awesome. Similarly, the willingness to innovate at the margins with such disruptive tax concessions, similar to what preceded Shanghai's evolution as a financial market powerhouse, is worthy of emulation.

These, rather than its brute force borrow and invest strategy, should attract the interest of policy makers elsewhere.